One impact from the CPI and PPI inflation reports this past week should reinforce the willingness of the Federal Reserve to raise its target interest rates in September and if inflation remains at these levels to do so again in December and in 2019.

Also, keep in mind that the inflationary impacts of Trump’s tariffs have not fully made their way into prices. As businesses costs increase a significant portion will be passed onto consumers.

For July the CPI, or Consumer Price Index, rose at a 2.9% rate which matches last months increase. This is close to double the 1.6% rate when Trump was elected and up from the 2.1% increase in December 2016, the month before he entered office.

The Core CPI, which excludes food and energy, increased from 2.3% year over year for June to 2.4% in July. This is the highest Core CPI in over 10 years. The Fed is anticipating that the Core rate will level off soon per Capital Economics, but Capital Economics forecasts that, “core inflation will continue to trend higher.”

Core CPIDesign: Nick DeSantis, Forbes Staff

The Producer Price Index, or PPI, has risen over a full percentage point over the past year from 2.0% in July 2017 to 3.3% this year. The Core PPI, without food and energy, has risen almost a full percentage point from 2.0% to 2.8%. Typically the PPI leads the CPI as businesses should eventually pass at least some of their higher costs onto consumers.

Real wages are essentially flat in the past year

As inflation increases it puts a damper on wages. While average hourly earnings have increased from $26.34 per hour to $27.05, or 2.7% over the past year, inflation at 2.9% has actually lead to real wages falling a small amount from $10.78 per hour a year ago to $10.76 in July this year.

U.S. Hourly WagesDesign: Nick DeSantis, Forbes Staff

Federal deficit is ballooning

The U.S. Treasury published its July Monthly Treasury Statement and it showed that the first 10 months of fiscal 2018’s deficit of $$684 billion has surpassed all of fiscal 2017’s deficit of $666 billion. One of the downsides of Trump’s tax cuts is its impact on the Federal deficit as it is projected to increase to $1 trillion in fiscal 2020 per the Congressional Budget Office.

I provide independent research of technology companies and was previously one of two analysts that determined the technology holdings for Atlantic Trust (Invesco's high net worth group), a firm with $15 billion under management. Before joining Atlantic Trust I was the Inter...